1. What is Strategy and Why is it Important?
Chapter One

2. Why do we need strategy?
The reasons why firms succeed and fail is perhaps the central question in strategy Answers the fundamental question of the firm Where we are now? Where we going? How are we going to get there?

3. Strategic Management Defined
decisions and actions that determine long-term performance
formulation and implementation of plans designed to achieve objectives
unifying theme that gives coherence and direction to organizational/individual decisions
game plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performance
integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage
What is a competitive advantage?

4. Competitive Advantage
When a firm implements a strategy that rivals can’t duplicate, or find it too expensive to do try to imitate

5. Today’s Competitive Landscape
New Managerial
Mindset
Global
Economy
Strategic Flexibility
Intelligence Management
Global Perspective
Speed, Innovation & Integration
Technology
Change &
Diffusion
Hypercompetition
Information
Technology
Knowledge
Intensity

6. What is Strategy?
Strategy is not doing similar activities better than your rivals – that’s operational effectiveness
continual improvement not a sustainable advantage
industry-wide cost reductions do not lead to increased profitability
examples: PCs, automobiles, airlines

7. What is Strategy?
1) Strategy is performing different activities or performing similar activities in a different way
Strategy is about positioning
a) Variety-based positioning
offering a unique choice of goods/services - Chic-fil-a, GameStop
b) Needs-based positioning
serving most/all of a particular group of customers’ needs - Babies R Us
c) Access-based positioning
serving a set of customers that require unique access – Kinkos, Movie Gallery, Superette

8. What is Strategy? Tradeoffs arise from
2) Strategy is about choosing a position which requires tradeoffs, choosing what not to do
without tradeoffs, all firms would imitate
Tradeoffs arise from
inconsistent image/reputation
different activities, products, equipment, employees, skills, systems, machines
priorities, internal coordination, and control

9. What is Strategy?
3) Strategy is about combining activities as advantages come from fit and reinforcing Operational effectiveness is about excellence in individual activities Fit/integration increases sustainability by reducing imitability

10. What is Strategy?
4) The desire to grow is most threatening to an effective strategy
Blurs uniqueness
Creates compromises
Reduces fit
Erodes original advantages

11. So….how can firm’s be profitable?
1) Choose an attractive industry in which to compete - Where we compete?
Corporate level strategy
2) Attain a competitive advantage within an industry - How we compete?
Business level strategy

12. Two Models of Profitability
I/O Model (Industrial/Organizational Economics Model) Resource Based Model

13. I/O Model Environment Drives Strategy & Performance
Three Key Assumptions
Therefore, firms must find an attractive industry or segment within the industry to gain above average profitability

14. I/O Model Environment Drives Strategy & Performance

15. Resource Based Model Firms’ Resources Drive Strategy & Performance
Three Key Assumptions
Therefore, firms must find an attractive industry or segment within the industry to gain above average profitability

16. Resource Based Model Firms’ Resources Drive Strategy & Performance

17. What is strategic effectiveness?

18. Strategic Vision vs. Mission
A strategic vision concerns “where we are going” or ”what do we want to be.”
Markets to be pursued
Future product/ market/ customer/ technology focus
Kind of company management is trying to create
The mission statement focuses on its “who we are and what we do”
Current product and service offerings
Customer needs being served
Technological and business capabilities

19. Mission Statements Boundaries of the current business
Fundamental purpose that sets it apart from other firms of its type
Conveys
Who we are,
What we do, and
Why we are here

20. Objectives Turns mission into performance outcomes
Organizations produce what is measured
Long and Short term

21. Types of Objectives Required
Financial Objectives
Strategic Objectives
Outcomes focused on improving financial performance
Outcomes focused on improving competitive vitality and future business position $

22. 6 Characteristics of a Good Objective
U SMART
Understandable
Stretching
Measurable
Agreeable
Realistic
Timebound

23. Leading versus Lagging Indicators
Current financial results are “lagging indicators” reflecting results of past decisions and actions—good profitability now does not translate into stronger capability for delivering better financial results later
However, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years ahead
Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance

24. Stakeholders Individual or groups who Capital Market Stakeholders
Affect mission/vision of the firm
Are affected by strategic outcomes of the firm
Have enforceable claims on the performance of the firm
Capital Market Stakeholders
Shareholders and capital suppliers
Product Market Stakeholders
Customers, suppliers, communities, unions
Organizational Stakeholders
Employees
Today’s firms must affectively balance the demands and expectations of all stakeholders.

25. Levels of Strategic Management

26. HP’s Corporate Strategy
Financial
Services
Enterprise
Storage &
Servers HP
Services
Software
Personal
Systems
Imagining
and Printing